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BIS Quarterly Review, 6 June 2011 - Earthquake, commodities, European debt crisis...

Investors retreated to less risky assets after the devastating Japanese earthquake and tsunami in early March, but this reversed quickly as uncertainty about the economic impact of these events diminished. Since late March, investors have refocused on global growth and inflation prospects as well as possible monetary policy responses.

Bond yields in major developed economies declined on weaker prospects for both global growth and inflation. Prices of many commodities reached a plateau or even fell, lowering the near-term inflation outlook. Investors continued to expect strong growth in emerging markets as they cut back their growth forecasts for the United States. Central banks in emerging market economies tightened monetary policy further, reacting to inflationary pressures from strong growth and past increases in commodity prices.

Widening growth and interest rate differentials between emerging and developed economies resulted in a broad-based depreciation of the US dollar and capital inflows to emerging market bonds and equities.

In May, market participants became increasingly concerned about an eventual restructuring of Greek government debt. Spreads on Greek sovereign bonds widened to record highs. Fears about the wider impact of such an event also fed into higher spreads for other countries and into a marked depreciation of the euro.

Tougher Capital Requirements Under Basel III Could Raise The Costs Of Securitization

Table Of Contents

  • Credit Risk: Minimum Regulatory Capital Requirements For Securitization Exposures
  • Credit Risk: Supervisory Haircuts On Securitization Collateral
  • Market Risk: Securitization Exposures
  • The Cost Of Securitization Is Likely To Rise
  • Appendix: Summary of Changes

Tougher Capital Requirements Under Basel III Could Raise The Costs Of Securitization

Bank for International Settlements (BIS) warning regulators - clearing industry systemic risk potential

The Bank of International Settlements (BIS) has warned regulators and central bankers that some market structures being created by the clearing industry risked creating the potential for systemic risk. However, the report from the Committee on Payment and Settlement Systems (CPSS), consisting of many of the world’s biggest central banks, also found that the ownership and structure of clearing houses made little difference to the risk they posed to global financial stability.

BIS - Joint Forum recommends improvements in risk aggregation models

The report suggests improvements to the current modelling techniques used by complex firms to aggregate risks. It also examines supervisory approaches to firms' use of risk aggregation models, particularly in light of the global financial crisis.

 

Mr Tony D'Aloisio, Chairman of the Joint Forum and Chairman of the Australian Securities and Investments Commission, said "This report is essential reading for firms considering ways to make more effective use of risk aggregation methods, and for supervisors wanting to understand firms' use of risk aggregation models to help identify shortcomings in a firm's approach."

BIS Quarterly Review discusses financial turbulence

The BIS Quarterly Review for June 2010, released today, attributes the recent surge in volatility in global financial markets to a loss of investor confidence due to fiscal concerns and the risk of weaker growth. The European rescue package bought a temporary reprieve from contagion in euro sovereign debt markets, but market concerns about the economic outlook remain.

The June issue also provides highlights from the latest BIS data on international banking and financial activity.

The changes to the market risk framework will increase average trading book capital requirements by two to three times

QUOTE: The changes to the market risk framework will increase average trading book capital requirements by two to three times their current levels

BIS: Comprehensive response to the global banking crisis

Bank for International Settlements press release: The Group of Central Bank Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, met on 6 September to review a comprehensive set of measures to strengthen the regulation, supervision and risk management of the banking sector. These measures will substantially reduce the probability and severity of economic and financial stress.

President Jean-Claude Trichet, who chairs the Group, noted that "the agreements reached today among 27 major countries of the world are essential as they set the new standards for banking regulation and supervision at the global level".

BIS wants financial products ranked like prescription drugs

tom mckillopREUTERS broke this story this week, in what is a really useful column if you are interested in Banking/Securities analytics/supervision:

BIS wants financial products ranked like medicines

Papers in April (2009) from the Bank for International Settlements

Basel SBBIn April, the Bank for International Settlements has published three new papers which develop the body of knowledge (the theory forge, as we like to call it) in the topic of Credit Risk analytics, stress testing and Economic Capital quantification. This post will summarise and refer them for you.

 

Liquidity Risk - The Definitive Methodological Paper - Drehman

 The European Central Bank has this weekend published a working paper which in my view provides the definitve methodological approach to Liquidity Risk analytics for any financial institution.

In my view any consulting firm or software house advising you on Liquidity Risk analytics and NOT referring this paper, is advising you in a "private language"; you should regard this paper as the benchmark against which to qualify and assure yourself that you are being given the right advice. This paper is the methodological blueprint for 'best practice' in Liquidity Risk analysis, just look at the authors and editors; it has had the European "first XI" 'hall of fame' in risk management expertise working on it, reflecting the importance of the issue right now. 

John A Morrison Profile / email John

 

The paper details are as follows;-

 

EUROPEAN CENTRAL BANK WORKING PAPER SERIES NO 1024 / MARCH 2009 

FUNDING LIQUIDITY RISK DEFINITION AND MEASUREMENT

by Mathias Drehmann (BIS) and Kleopatra Nikolaou (ECB)

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